KNOT Offshore Partners LP Common Units representing Limited Partner Interests

Ladies and gentlemen, thank you for joining us and welcome to the Knopp fourth quarter 2025 earnings call. After today's prepared remarks, we will host a question and answer session with an opportunity for equity research analysts to ask questions. If you'd like to ask a question, please raise your hand. If you have dialed into today's call, please press star nine to raise your hand and star six to unmute when prompted. I will now hand the conference over to Derek Lowe. Please go ahead, sir.

Thank you, Tyler, and good morning, ladies and gentlemen. My name is Derek Lowe, and I'm the Chief Executive and Chief Financial Officer of Knott Offshore Partners. Welcome to the partnership's earnings call for the fourth quarter of 2025. Our website is knottoffshorepartners.com, and you can find the earnings release there along with this presentation. On slide two, you will find guidance on the inclusion of forward-looking statements in today's presentation. These are made in good faith and reflect management's current views, known and unknown risks, and are based on assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied in forward-looking statements. and the Parlour does not have or undertake the duty to update any such forward-looking statements made as of the date of this presentation. For further information, please consult our SEC filings, especially in relation to our annual and quarterly results. Today's presentation also includes certain non-US gap measures, and our earnings release includes a reconciliation of these to the most directly comparable gap measures. We begin on slide 3 with a comment on the unsolicited and non-binding offer from our sponsor, KNOT, to buy the publicly owned common units for $10 per common unit, which we received during the fourth quarter. As announced in a press release on March 19th, the mutual decision was made by the independent KNOP Conflicts Committee and the sponsor to conclude those discussions with no transaction recommended. All information provided by KNLB's conflicts committee about that process was included within the March 19th press release, and I'll not be able to comment any further during today's call. On slide four, we have the Q4 financial and operational headlines, certain of which reflect the impact of the non-cash impairment related to the Baird organisation. Revenues were $96.5 million. Operating income was $8.4 million on a fully reported basis, or $28.6 million. when excluding the impact of the impairment on Bodal. Similarly, net income on a fully reported basis was a loss of $6.2 million, whereas it was net income of $14 million when we exclude the impact of the impairment. Adjusted EBITDA was $59.3 million. And as of December 31st, 2025, we had $137 million in available liquidity, made up of $89 million in cash and cash equivalents, plus $48 million in under-owned capacity on our credit facilities, and that was $11.8 million higher than September 30th. We operated with 99.5% utilisation, taking into account the scheduled dry docking of Sinovac and Ipsen, which amounts to 96.4% utilisation overall. Following the end of Q4, we declared a cash distribution of 2.6 US cents per common unit, which was paid in February. On slide five, we have the developments during Q4. Early in the quarter, we entered into a 71.1 million senior secured term loan facility to refinance the Nova Knudsen. On November 4th, the Vigdis Knudsen transitioned from a time charter contract to a bare boat charter with the same customer, Shell, extending until at least 2030. We completed our second of two RCF refinancings rolled over on similar terms. Our next refinancings are in the late third and early fourth quarter of this year. And on November 21st, we agreed the time charter for Fort Laser Knudsen with KMOT to commence during the second quarter of 2026 and lasting between one and three years. Given the vessel's smaller size relative to the Suezmax that has become standard in the Brazilian offshore segment, the vessel is expected to transition to the much more diversified North Sea. Then on slide six, the principles of elements in the first quarter has been the termination of discussions around the offer from KNRT, which I described earlier. Turning to slide seven for a high-level summary of our positive momentum coming into the spring of 2026 with the tightening market and expanding backlog and the balance sheet continuing to strengthen. In both Brazil and the North Sea, we continue to see tightening markets, driven by FPSO startups, ramp-ups, expansions, new discoveries, and in a number of cases, technology-driven increases in production beyond mainplate capacity. In each instance, these increased volumes are the outcome of lengthy, often capex-intensive projects, such that there are not typically sudden, unanticipated step changes in shuttle tanker demand that catch the market off guard. Nevertheless, the increase in shuttle tanker service volumes across both markets has been both sustained and sufficient to tighten the supply-demand balance. Petrobras will continue to deploy its long-committed pipeline of FPSOs and to expand production capacity across its existing fleet. We've sustained our backlog as of December 31, 2025, with a $929 million of fixed contracts averaging 2.6 years and rather more if all the options are exercised. At year end, our fleet of 19 vessels had an average age of 10.2 years. We are continuing to repay debt at $90 million or more per year, which we think is prudent with a depreciating asset base. Having reliably addressed our refinancing needs, typically on very consistent terms, we now look to a $220 million five-ship facility in September 2026 and a $65 million single-ship facility in October 2026, secured by Lever Knudsen. Over slides 9 to 12, we provide the financials for Q4, the highlights of which we have covered already. On slide 13 is our debt maturity profile, on which you can see we have material repayment obligations later this year. While no guarantees can be made, we have historically benefited from our access to a wide pool of lenders, attractive bank finance and several key lender relationships with major players. Moreover, we've been encouraged by our refinancing experiences in recent years and the strong signal they provide regarding lenders' continued appetite. Notably, the average margin on our floating rate debt during the fourth quarter was 2.2% over SOFA. Moving on to slide 15 of our charter portfolio, I've covered most of the updates here. But I believe this is a very useful resource for investors looking to track the primary movements where a change can occur in a highly stable portfolio of cash flows. That is when charters turn over and when there are dry docks that will cause our fire and incurrence of capex costs. Based on current charter rates, we believe charter options are likely to be taken up given the strength of the charter market. On slide 16, you can see our strong coverage through the coming quarters. Some charterers' options that market conditions suggest have a good likelihood of being exercised and a small amount of open time. In all, we have 93% of vessel time in 2026 covered by fixed contracts and 69% in 2027. If all relevant options are exercised, this rises to 98% in 2026 and 88% in 2027. On slide 17, you can see the drop-down inventory held at the sponsor. Dropdowns have been the route to growth in the fleet throughout the life of the partnership and are the means of replenishing and rejuvenating the fleet given the depreciation in our assets. I would underscore both that our board has consistently acknowledged the importance of dropdowns for the partnership and also that any consummated dropdown would first have to be approved by the Independent Conflicts Committee. On slides 18 to 20, we include again some commentary from Petrobras, with relevant highlights from a five-year plan they have released for 2026 through to 2030, as well as a useful overview of their significant 2025 progress from their recently reported full-year 2025 results. We believe that these materials from Petrobras provide a useful insight into the Brazilian offshore market, and we'd encourage you to review the extensive materials that Petrobras regularly publishes. In short, though, from the shuttle tanker owner's perspective, PetroRef continues to deploy significant capex into a long-term FPSO pipeline in shuttle tanker service areas to find new ways to increase volumes from existing fleet and overall to continue expanding its aggregate production on time or in a number of instances ahead of schedule. As with the development we're seeing in the North Sea, this gives us comfort that shuttle tanker demand should readily absorb the current order book. Further, we believe that the current order book still trends towards a medium-term shortage of shuttle tankers when set against the forthcoming production. To summarise on slide 21, during Q4, we had strong utilisation and financial results. We refinanced the Sonoba Knutson facility and the second RCF. We secured additional charter cover and paid a quarterly distribution. And in Q1, we've seen the termination of the discussions around the offer from KNOT. With that, I'll hand the call back to Tyler for any questions.

Thank you. We will now begin the question and answer session, which is open to equity research analysts. If you'd like to ask a question, please raise your hand now. If you have dialed in to today's call, please press star 9 to raise your hand and star 6 to unmute. Please stand by while we compile the Q&A roster. And your first question comes from the line of Frederick Dubois with Fernley Securities. Your line is now open. Please go ahead.